Rightways

Saturday, September 17, 2016

Challenging 2017 seen for Singapore's shipping services

It has been a rough week for Singapore’s shipping services industry and the going could get even tougher next year with record debt falling due.

Rickmers Maritime, which operates container ships, said it is asking creditors for leniency on about US$253mil of debt. Marco Polo Marine Ltd, a provider of barges and tugs for coal, steel scrap and iron ores, said Tuesday it’s asking bondholders for approval to delay paying S$50mil (US$36.5mil) of securities due next month.

The city-state’s shipping and other logistics firms face a record US$1.8bil in note repayments in 2017, data compiled by Bloomberg show.

Singapore, a former British colony, relied on its port to help transform itself into one of Asia’s so-called tiger economies. Container throughput shrank 8.7% in 2015 as global trade slowed, while slumping crude prices have hurt firms that service the energy industry.

Swiber Holdings Ltd, which operates construction vessels to support the oil industry, defaulted in August, while Ezra Holdings Ltd said last week it held talks on potential fundraising.

Sembcorp Marine Ltd and Keppel Corp have reported slumping profits.

“It doesn’t look like the worst is over for the maritime industry,” said Joel Ng, an analyst at KGI Fraser Securities in Singapore. “It’s tough for the creditors.

The banks need to continue to provide liquidity given the industry’s cashflows are tight.”

Singapore’s bad loans rose to 2.25% of the total in 2015, the highest since 2009. Oil services firms are also facing mounting difficulties as crude prices have dropped to about half the prices in 2013, forcing energy giants to put investment plans on hold.

“The shipping and oil and gas space has really been a minefield in the bond market,” said Terence Lin, an assistant director of bonds and portfolio management at fund researcher iFast Corp in Singapore.

“One of the positives from this is that there’ll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes.”

Rickmers Maritime won’t be able to repay US$179.7mil of senior debt due in March 2017 and the interest and principal on S$100mil of notes due in May 2017, it said in a filing yesterday.

It’s asking investors to exchange their debt with S$28mil of new perpetual securities to avoid potential liquidation or judicial management that it says would be “likely to result in zero recovery for noteholders.”

Marco Polo Marine told some noteholders of its debt-delay plan at a meeting Tuesday, and those present “appeared generally supportive,” it said in an exchange filing.

It will hold another meeting on Sept 16 on the debt extension proposal, which it didn’t disclose.

“The boards and management teams of the offshore and marine bond issuers still seem to be in denial on the need to do proper balance sheet restructuring,” said Kurt Metzger, a Singapore-based restructuring consultant at GEM Advisory.

“Bondholders are facing significantly higher risk and should be looking for significantly higher returns and improved structures.” – Bloomberg